Consider a bond that has a current yield of 5 percent, a yield to maturity of 5.3 percent, and a coupon rate of 5.5%. In the valuation of this bond, we assume that the interest earned on the bond is reinvested at:

Question

Quizplus · Accepted Answer

The yield to maturity (YTM) of a bond assumes that all coupon payments are reinvested at the YTM rate itself, which in this case is 5.3 percent.

Consider a Bond That Has a Current Yield of 5